A) ABSTRACT / HEADNOTE

The case Balasaheb Keshawrao Bhapkar & Ors. v. Securities and Exchange Board of India & Ors. centered on the invocation of Article 142 of the Indian Constitution to ensure justice for affected investors. The petitioners, facing numerous criminal cases and lengthy incarceration, sought the liquidation of their companies’ attached assets to repay investors. The Supreme Court constituted a High-Powered Sale Committee (HPSC) to auction assets, prioritize investor claims, and streamline the liquidation process. Justice Ravindra Bhat chaired the HPSC, and the decision emphasized the use of Article 142 to provide remedies beyond traditional judicial means, considering procedural complexities and systemic limitations.

Keywords: Article 142, High-Powered Sale Committee, SEBI, liquidation, investor claims.

B) CASE DETAILS

• i. Judgment Cause Title: Balasaheb Keshawrao Bhapkar & Ors. v. Securities and Exchange Board of India & Ors.
• ii. Case Number: Writ Petition (Crl) No. 546 of 2023
• iii. Judgment Date: 15 July 2024
• iv. Court: Supreme Court of India
• v. Quorum: Surya Kant and K.V. Viswanathan, JJ.
• vi. Author: Justice Surya Kant
• vii. Citation: [2024] 7 S.C.R. 730; 2024 INSC 525
• viii. Legal Provisions Involved:
  • Article 142 of the Indian Constitution
  • Section 11AA of the SEBI Act, 1992
  • Prize Chits and Money Circulation Scheme (Banning) Act, 1978
  • Maharashtra Protection of Interest of Depositors (MPID) Act, 1999
• ix. Judgments Overruled: None
• x. Case Related to: Corporate Law, Securities Law, and Investor Protection Law

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The petitioners, promoters of the Sai Prasad Group, were embroiled in allegations of unauthorized fund mobilization through collective investment schemes. SEBI initiated proceedings, revealing systemic fraud impacting thousands of investors. Despite interim measures, the prolonged delay in asset liquidation and investor refunds highlighted procedural inefficiencies. The Supreme Court stepped in, using Article 142 to constitute the HPSC for a time-bound resolution. The judgment reflects judicial intervention to address structural failures in financial fraud cases.

D) FACTS OF THE CASE

1. Petitioners’ Background:

   • Founders of the Sai Prasad Group, involving multiple companies like SPPL, SPFL, and SPCL.
   • Accused of illegally mobilizing funds from investors through unregistered collective investment schemes.

2. SEBI’s Actions:

   • SEBI received complaints in 2010 and 2013 regarding illegal fund mobilization.
   • Issued orders barring the companies from fundraising and freezing assets for investor protection.

3. Criminal Proceedings:

   • Multiple FIRs registered under the IPC, Prize Chits Act, and MPID Act across several states.
   • Petitioners remained in custody for extended periods due to these cases.

4. Investor Claims:

   • Forensic audits revealed liabilities exceeding ₹4700 crores.
   • Over 500+ properties were attached, requiring complex identification and valuation processes.

5. Judicial Intervention:

   • The case demanded a resolution to balance investor interests, legal complexities, and procedural delays.

E) LEGAL ISSUES RAISED

1. Whether the facts warranted invoking Article 142 for constituting a High-Powered Sale Committee (HPSC).
2. Whether SEBI and other entities were equipped to manage asset liquidation efficiently.
3. How to ensure investor claims were satisfied transparently and expeditiously.

F) PETITIONERS’ ARGUMENTS

1. The petitioners argued for expedited liquidation of attached assets under judicial supervision to repay investors.
2. They contended their prolonged incarceration violated their rights, given their willingness to cooperate with asset auctions.
3. They highlighted SEBI’s limitations in handling the auction process, necessitating judicial intervention.

G) RESPONDENTS’ ARGUMENTS

1. SEBI emphasized its efforts to attach and auction assets but admitted challenges in a time-bound liquidation due to procedural hurdles.
2. The state authorities and MPID Court supported the need for an independent committee to streamline the liquidation process.

H) RELATED LEGAL PROVISIONS

1. Article 142: Empowering the Supreme Court to pass any order to ensure complete justice.
2. Section 11AA of the SEBI Act: Governing collective investment schemes.
3. Prize Chits Act, 1978: Regulating illegal financial schemes.
4. MPID Act, 1999: Protecting depositors’ interests in financial fraud cases.

I) JUDGMENT

a. RATIO DECIDENDI

1. The Court held that Article 142 allowed it to create mechanisms for ensuring justice in exceptional cases.
2. Constitution of the HPSC addressed systemic failures in investor protection and financial fraud cases.

b. OBITER DICTA

1. The judgment acknowledged the importance of judicial creativity in tackling procedural inefficiencies.
2. It emphasized protecting innocent investors’ rights over procedural formalities.

c. GUIDELINES

1. HPSC Constitution:

   • Chaired by a retired Supreme Court Judge.
   • Members included experts and state representatives.

2. HPSC Powers:

   • All powers of a civil court to expedite the process.
   • Authority to engage valuers and e-auction service providers.

3. Investor Refund Mechanism:

   • Database creation of investors and claims.
   • Transparent categorization and refund process through an escrow account.

4. Accountability:

   • HPSC required to submit periodic reports to SEBI and the Supreme Court.

5. Interim Bail:

   • Granted to petitioners to aid the liquidation process.

J) REFERENCES

a. Important Cases Referred

1. National Spot Exchange Ltd. v. Union of India [(2022) SCC Online SC 2310]
2. Pinak Pani Mohanty v. Union of India ([2023] 3 SCR 778)

b. Important Statutes Referred

1. Article 142, Constitution of India
2. SEBI Act, 1992
3. Prize Chits and Money Circulation Scheme (Banning) Act, 1978
4. MPID Act, 1999